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Govt 8-mth surplus bigger than expected as less spending offset lower corporate tax take

Thursday 28th March 2019

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The government's eight-month operating surplus was bigger than expected, primarily because it didn't spend as much as it anticipated, which helped offset a smaller company tax take than forecast. 

The operating balance before gains and losses (obegal) was a surplus of $2.25 billion in the eight months ended Feb. 28, more than the $1.91 billion projected in the Treasury's December half-year economic and fiscal update forecasts, though down from the $2.85 billion surplus a year earlier.

Core Crown spending shrank 7.4 percent to $56.15 billion from a year earlier, and was $713 million below expectations, with some $200 million of predicted education spending not occurring because of demand-driven factors and a further $200 million of welfare benefits and impaired Crown receivables below forecast. 

The Crown's tax take rose 5.9 percent to $53.87 billion, some $137 million below forecast. Corporate taxation was about $400 million short of expectations, largely due to provisional tax estimates and assessments coming in below forecast. Bigger than expected customs and excise duties helped bridge the gap. 

"The accounts show spending is stable, highlighting the government’s careful fiscal management, with core Crown expenses below forecast," Finance Minister Grant Robertson said in a statement. "The government will continue to keep a careful watch on spending, while making the important investments in our economy and society."

Robertson will unveil his well-being budget on May 31, with the coalition fixated on levelling what they claim is an unequal playing field by offering targeted support.

Transfers and subsidies rose to $18.32 billion in the eight months through February from $16.53 billion a year earlier, but were still $132 million below expectations. Treasury officials had anticipated higher KiwiSaver subsidies and more spending on official development assistance in its foreign aid programme. 

The accounts show smaller net debt than forecast at $59.85 billion, or 20.4 percent of gross domestic product, compared to $59.74 billion, or 21.2 percent of GDP, a year earlier. 

The residual cash deficit of $1.89 billion was in line with forecasts. Still, the Crown's cash flow statements show capital spending of $6.89 billion was $2.68 billion below expectations, including an $879 million underspend on the purchase of physical assets at $5.7 billion. 

The government last year flagged a $42 billion capital spending programme over five years to rebuild ageing and inadequate infrastructure. It's forecasting a $10.67 billion spend on physical assets for the year ending June 30, up from $7.67 billion a year earlier. 

The Crown's operating balance was a deficit of $1.85 billion, compared to a forecast surplus of $1.91 billion. Changes in the discount rates used to calculate ACC's long-term claims and the Government Superannuation Fund's long-term liabilities and unfavourable shifts in exchange rates led to $4.2 billion of losses. 

The Crown's net worth was $128.25 billion, or 43.7 percent of GDP, below the $132.35 billion forecast, due to the operating deficit. 


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